THE economy in Ireland's largest trading partner barely grew between April and June and industrial output shrank, stoking doubt about the prospects for recovery in both Ireland and the UK.

Gross domestic product grew by 0.2pc in Britain in the second quarter from the first, which took the annual growth rate to 0.7pc, the lowest since the first quarter of 2010, the Office for National Statistics said yesterday.

Economists had expected growth of 0.2pc after the economy flatlined over the six previous months.

Bank of England policymaker Martin Weale told Germany's 'Handelsblatt' newspaper there was a real danger the economy could shrink again.

No country matters more to the Irish economy. The UK is Ireland's largest export market, taking 16pc of everything sent abroad, while Ireland is the UK's fifth largest export market. Any slowdown in our largest export market will have a knock-on effect on growth here.

The Central Bank is due to publish new growth forecasts for this year and next on Friday, with some economists such as Bloxham's Alan Quaid predicting the bank will cut predictions for growth.

In the UK, economists blamed some of the slow growth on the wedding of Prince William to Kate Middleton which triggered a public holiday. The statistics office said special factors such as an additional holiday for the royal wedding and the after-effects of the tsunami in Japan subtracted up to 0.5 percentage points of quarterly growth in the second quarter.

"If you consider that the bank holiday for the royal wedding probably subtracted a quarter per cent or so from growth, the numbers aren't that far from being respectable," said Investec economist Philip Shaw. "However, looking forward there are a number of headwinds to growth and the policy outlook remains very uncertain."

Other unusual factors affecting GDP were the £300m spent on tickets for the Olympic Games and warm weather in April, which encouraged people to take holidays locally and stay in hotels.

The sluggish economy is a serious headache for David Cameron's government which is already under pressure over politicians' ties to Rupert Murdoch's media empire in the wake of the phone-hacking scandal. Still, the government left little doubt it would stick to its deficit reduction plan. Finance minister George Osborne said the economy was stable thanks to the government's commitment.

"Abandoning that now, as some argue we should, would only risk British jobs and growth," he said in a statement after the GDP data release.

The statistics office said output fell 1.4pc on the quarter, while the service sector expanded by 0.5pc, driven by growth in transport, communications and business services.